Fully chastened by Marx's warning that those who try to explain interest
rates according to some necessitous law are engaging in "mysticism &
pedantry," I'll take a shot here. Interest rates rise and fall for
"economic" reasons, like changes in the demand for and supply of loanable
funds or liquidity, but also for political ones, too. The overall
political influence on interest rates is the expansion of, or in tough
times, the preservation of, rentier wealth. In the late 70s-early 80s,
that goal was served by tight money and high rates; in the deflationary
environment of the late 80s-early 90s, it was served by low rates. In both
cases, the coupon-clippers' bacon was saved.
Doug
Doug Henwood [[EMAIL PROTECTED]]
Left Business Observer
212-874-4020 (voice)
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On 21 Feb 1994, Paul Cockshott wrote:
> Trond asks what is the difference between an economic
> and a political determination of interest rates?
>
> He says that we have a ruling class that benefits from high
> interest rates and has a long tradition of arguing for that.
>
> This is all true, but it does little to explain why interest
> rates should change - the rentiers would presumabley be best
> served by the highest interest rates. Why then do they ever come
> down.
>
> A traditional bourgeois economic explanation would be interms
> of supply and demand for money. Alternative economic explanations
> are possible. A political explanation would focus on the constitutional
> position of the central bank first, since this will tend to determine
> which class fractions it serves, and then the overall interests of
> these classes as refracted through economic ideologies. These
> overall interests include issues like winning elections, maintaining
> the parity of the currency, promoting industrial development etc
> depending on which group effectively controls the central bank.
>
> --------------------------------------------------------------------
> Paul Cockshott , WPS, PO Box 1125, Glasgow, G44 5UF
> Phone: 041 637 2927 [EMAIL PROTECTED]
> [EMAIL PROTECTED]
